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PETITIONER: M/S. MEERA COMPANY,LUDHIANA

       Vs.

RESPONDENT: THE COMMISSIONER OF INCOME TAX,PUNJAB, J&K AND CHANDIGARH,PA

DATE OF JUDGMENT:       11/03/1997

BENCH: B.P. JEEVAN REDDY, SUHAS C. SEN, G.T. NANAVATI

ACT:

HEADNOTE:

JUDGMENT:   (WITH C.A. Nos.1664-66/1986. 4365-69/1985 AND 1694/1995                       J U D G M E N T SEN, J.      This is  an appeal  against  an  order  passed  by  the Division Bench  of the Punjab & Haryana High Court disposing of an  Income Tax  Reference relating  to assessments of the Assessment years 1963-64 to 1967-68.      The following questions of law had been referred to the High Court by the Income Tax Appellate Tribunal:      "1.  Whether on  the facts  and  in      the circumstances  of the case, the      Tribunal was  circumstances of  the      case, the  Tribunal  was  right  in      law, in holding that Meera & Co. is      a  body   of  individuals   and  is      assessable as such?      2.   Whether on  the facts  and  in      the circumstances  of the case, the      Tribunal was  right in holding that      the  assessment   of  the  body  of      individuals identified  as Meera  &      Co. should  be made under Section 4      read with  Section 2(31)(v) and not      under Section 160, 161 or 166?:      The High  Court has given brief summary of the relevant facts as under:      Shri Prem  Narain, an  individual, carried  on business under the  name M/S.  Meera  &  Co.  at  Ludhiana.  He  died intestate on  August 25,  1962 survived by his mother, widow and three  minor children.  All the  assets of  the deceased including the business styled as Meera & Co. devolved on his five legal  heirs. The  mother of  the deceased relinquished her interest  in the  assets of  the deceased against a lump sum payment.  For the  purpose of  these references,  we are concerned with  the widow  and three  minor children  of the deceased. The  business of M/S. Meera & Co. was continued as a single  unit in the same name by Smt. Krishna Gupta, widow of the  deceased, obviously  on her  behalf and on behalf of all the three minor children as their guardian, The accounts were maintained  in the  name of m/s. Meera & Co. The yearly

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profits were  ascertained and divided. The Income Tax Return for the  assessment years  1963-64 to  1967-68 were filed by Smt. Krishan  Gupta on behalf of m/s. Meers & Co. The status of the  assessee was  described as ‘association of persons’. These returns  reflected the  entire  income  from  business previously carried  on by  shri Prem  Narain,  deceased.  On January 25,  1968, Smt. Krishna Gupta filed the return under protest and  further revised  the returns for the assessment years 1963-64 to 1966-67, declaring the same income that had been  shown   in  the  returns  already  filed  but  without specifying the  status therein.  It was  contended that  the income from  the business should be assessed in equal shares in the  hands of four legal heirs of the deceased. The minor children of  the deceased  also filed separate returns where the share  of profit  from m/s. Meera & Co. was included for rate purposes  only. The  Income-tax Officer  did not  agree with the  altered position  taken by  the assessee  that the income from the business was liable to be assessed in equal shares in  the hands  of the  four heirs of the deceased. He held that  the business  was for one and common unit and the same was  assessable in the status of ‘body of individuals’. The assessee,  being dissatisfied  with  the  order  of  the Income Tax  Officer,  filed  an  appeal  and  the  Appellate Assistant Commissioner  held that  the entire  income of the business was  assessable in  the hands of Smt. Krishna Gupta as a person carrying on business in individual capacity. The Revenue and  the assessee  both  filed  appeals  before  the Income Tax  Appellate Tribunal. The Accountant member of the Appellate Tribunal found that the business was carried on as an organic  unit by Smt. Krishna Gupta on her own behalf and on behalf  of her  three minor  children  as  their  natural guardian. On  the death of Shri Prem Narain, his estate fell to his  legal heirs  under Section 8 of the Hindu Succession Act as  tenants-in-common. The  special provisions regarding the minors and guardians contained in Sections regarding the minors and  guardians contained  in Sections 160. 161 or 166 of the  Income Tax  Act, (hereinafter  referred  to  as  the ‘Act’) shall  apply and will override the general provisions contained in  Sections  4  and  2(31)(v)  of  the  Act.  The Judicial member took a different view. According to him, the entity was  liable to  be assessed under Section 4 read with Section 2(31)(v)  of the  Act. He repelled the contention of the assessee  that the assessments of the minors should have been  done   under  the   special   provisions   meant   for representative assessees,  i.e. Sections  160 etc.  He  held that before the assessee could be so treated, he must filter through the charging Section 4 read with Section 2(31)(v) of the Act  and if  he cannot do so, he must stay there. In the event of  the assessee  being  a  body  of  individuals,  as defined  in   Section  2(31)(v),   the   question   of   the applicability of  Sections 160,  161 etc. of the Act did not arise.  As   the  two  members  of  the  Appellate  Tribunal differed, the  matter was  referred to  a third  member  who agreed with  the view  taken by  the Judicial member and the appeals of the assessee were consequently dismissed.      Before the High Court, the contention made on behalf of the appellant was that Smt. Krishna Gupta had two capacities in this matter. She was managing the business of Meera & Co. in her  own right  as  well  as  a  guardian  of  the  minor children. As  a guardian-trustee  of the minor children, she should have  been assessed  as a  representative assessee in accordance with  the provisions  of Sections 160, 166 of the Act. Krishna  Gupta acted on behalf of the minors in running the business  of  Meera  &  Co,  Income  from  the  business representing the  share of  the minors accrued to them or to

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their guardian  representing them.  That being the case, the mode of  assessment contained in Chapter XV of the Act shall get precedence  being special  provisions  relating  to  the minors and  assessment should  be made  accordingly. It  was further contended  that the assessments could not be made in the status  of ‘body  of individuals’  which postulates more than one  individual. In  this case,  the business was being managed by  Krishna Gupta  on her  own behalf  and  also  on behalf of  the minors. There is no question of assessing the income of the father in the status of ‘body of individuals’.      The High  Court was,  however, of  the  view  that  the expression  ‘body   of  individuals’   should  receive  wide interpretation to  include a  combination of individuals who have unity of interest (mother and her three minor children) and were actively engaged in the business carried on for the benefit of  all of  them by  one of them and therefore, they would constitute  a ‘body  of individuals’.  In the  instant case, on  the death of Prem Narain, business under the trade name Meera  & Co.  passed on  to Krishna Gupta and her three minor children.  The fact  that  the  minors  had  no  legal capacity to  enter into  an  agreement  was  irrelevant  for determining their  status as  a constituent  in the ‘body of individuals’ in  terms of  Section 2(31)(v)  of the  Act. In that view  of the  matter, the  High Court answered both the questions in the affirmative and in favour of the Revenue.      In the  appeal before us, it has been contended that in the facts of this case, it could not be said that the mother and three  assessable as  a unit. The business profit should have been  apportioned and  assessed in the hands of each of the heirs  of Prem  Narain separately  and in  the status of individual. Secondly,  it was  contended  that  the  special provisions relating  to the minor contained in Chapter XV of the Act  will override  the general  provisions relating  to assessment in other parts of the Act. When the income of the firm accrued  to the minor, assessment should have been done in accordance  with the  provisions of Sections 160, 161 and 166 of the Act,      We are  unable to  uphold any of these two contentions. The business  of Meera  & Co.  was set up by Prem Narain who ran this  business as  a sole-proprietory  concern till  his death. After  his death,  the entire  business devolved upon his mother, widow and minor children. The mother’s share was bought by the widow and her children and they carried on the business in the name of Meera & Co. The business was carried on as  before jointly by the widow on her own behalf as well as on  behalf of  the minor children. The profits that arose out of the business were a result of the business activities carried on  jointly by the mother on her own behalf and also on behalf  of minor  children.  In  such  a  situation,  the assessments  had  to  be  made  in  respect  of  the  income generated  in  the  business  in  the  status  of  ‘body  of individuals’.      On behalf  of the  appellant it has been contended that "a body  of invididuals"  is an  altogether different entity and should  not be  equated to  "an association of persons". The phrase  "an association  of persons" is well un-derstood in the  Income Tax Act and has been explained in a number of cases. The  legislature is  presumed to  know  the  judicial interpretations given to the phrase "Association of Person". "Body of  individuals" in  this background  of facts must be held to  be some  other entity  not akin  to "Association of Persons". A Board of Trustees or a society of persons can be treated as  "a body  of individuals". A group of individuals cannot be  treated as  "a body  of individuals".  A group of individuals cannot be treated as "a body of persons" more so

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when the  group is  receiving income  from an enterprise not set up  by that  group. The meaning ascribed to "association of persons" cannot be applied to "body of individuals".      Before examining this question, we shall notice how the expression "association  of  persons"  had  been  understood under the Tax Act, 1922 over the Years.      Initially, the  charge under  Section 3  of the  Indian Income Tax  Act, 1922 was on income of "individual, company, firm and other association of individuals". These words were substituted  by   Section  3   of  the   Indian  Income  Tax (Amendment)  Act,  1939  by  the  words  "individual,  Hindu undivided family,  company and local authority, and of every firm and other association of persons or the partners of the partners of  the firm  or the  members  of  the  association individually". Commenting  on this  charging Section, it was observed by  Beamount, C.J.  in Commissioner  of Income Tax, Bombay v.  Laxmidas Devidas and another, (1937) 5 ITR 584 at page 589 as under:      "It seems to me that an association      of  two   or   more   persons   for      acquisition of property which is to      be managed  for  the    purpose  of      producing income,  profits or gains      falls  within   the  words   "other      association of individuals".           The  fact   that  one  of  the      assessees  during   the   year   of      assessment was a minor, does not, I      think affect the question......What      we have  got is  the  ownership  of      property  by   that   property   of      profits or gains."      In the  case of  Commissioner of  Income Tax, Madras v. Salem District  Urban Bank  Ltd. 8 ITR 269, a Bench of three judges  of   the  Madras  High  Court  took  the  view  that ‘association of  individuals’ in Section 3 of the Income Tax Act, 1922 would apply even to a corporate body which for the most part  was composed of co-operative societies. On behalf of the  appellant reliance was placed on the judgment in the case of  Commissioner of  Income Tax,  Bombay  v.  Ahmedabad Mill-owners’ Association.  7 ITR 369, where it was held that the expression  ‘association of  individuals’ in  Section  3 meant  an   association  of   human  beings.   Leach,  C.J., considered the  opinion expressed  in The  Trustees  of  Sir Currimbhoy Ebrahim Baronetcy Trust v. Commissioner of Income Tax. (1932)  5 ITC  484, preferable to that expressed in the case of Ahmedabad Mill Owners’ Association, (supra) and held that  ‘Association   of  Individuals’   did  not   mean   an Association of human beings only. Leach, C.J., observed:-      "If a  corporate body  created by a      statute is an individual within the      meaning of  the section  and I hold      that it  is, a  cooperative society      registered under  the  Co-operative      Societies Act  must fall within the      same category,  It  is  a  corporae      body and  has perpetual succession.      I   consider   that   it   is   not      reasonable  to   suppose  that  the      Legislature  intended   that  there      should  be   a  difference  in  the      meaning of  the  word  ‘individual’      and the  plural  ‘individuals’.  If      the word  ‘individual’  includes  a      corportion, the  words ‘association

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    of  individuals’  must  embrace  an      association  of  corporate  bodies,      and therefore,  the assessee  is an      ‘association of individuals’."      Possibly because  of this  difference  of  the  opinion about  the   meaning   of   the   phrase   ‘association   of individuals’, Section  3 of the 1922 Act was amended in 1939 and charge was imposed on "every individual, Hindu undivided family, a  company and local authority, every firm and other association of  persons or  the partners  of the firm or the members of the association individually".      This amendment  took care  of  the  controversy  as  to whether the phrase "association of individuals" will take in association of natural and artificial persons or bodies like co-operative  societies.   Derbyshire,  C.J.  explained  the amended charge  in the case of Re. B.N.Elias & Others, 3 ITR 408, in the following words:      "Previous to  the  year  1924,  the      words of  the section  in  question      were "individual, company, firm and      Hindu  undivided  family".  By  the      Indian Income  Tax Amendment Act of      1924 (Act  XI of  1924)  the  words      "individual,    Hindu     undivided      family,  company,  firm  and  other      association of individuals" have to      be  construed   in   their   plain,      ordinary  meaning.   There  is   no      difficulty    about     the    word      "individuals".  "Associate"  means,      according to the Oxford Dictionary,      "to join  in common  purpose. or to      join  in   an  action".  Did  these      individuals  join   in   a   common      purpose, or  common action, thereby      becoming    an    association    of      individuals?  In   my  view,   they      did....In    arriving    at    that      conclusion, I  am fortified  by the      words of LORD JUSTICE COTTON in the      case of  Smith v.  Anderson (15 Ch.      247.  at   page  282).   There  the      learned LORD  JUSTICE is discussing      the    meaning    of    the    word      "association" as  used in Section 4      of the  Companies Act  of 1862. The      word occurs  along with  the  words      "company or  partnership".  Cotton,      L.J. says  at page  282: "U  do not      think it  very material to consider      how  far   the  word  "association"      differs     from     company     or      partnership, but I think we may say      that if  "association" is  intended      to denote  something different from      a company  or partnership,  it must      be judged  by  its  two  companions      between which  it  stands,  and  it      must  denote  something  where  the      associates are  in  the  nature  of      partners. It   seems  to   me  (not      that I  think it  material) that it      might have been intended to hit the      case which we have frequently seen,      of

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    a number of persons  or a number of      firms joining  themselves  together      for the  purpose of  carrying on  a      particular adventure  in  order  to      make gain  by it".  Then he goes on      to describe instances of that.           In my view, these persons have      joined  themselves   together   and      remained, joined  together for  the      purpose  of  buying,  holding,  and      using   that    property    "Norton      Buildings" in order to make gain by      it. In  so doing  they have  become      and  were,  at  the  time  of  this      assessment   an   "association   of      individuals" within  the meaning of      Section 3  of the Indian Income Tax      Act."      Costello,  J.   in  his  concurring      judgment observed:      "Mr.  Banerji  was  at  very  great      pains to demonstrate to us that the      combination  of   individuals  with      which we  are concerned  could  not      properly    be     described     as      partnership and  he emphasised  the      face that  they were  co-owners  of      the property  which is known as the      "Norton Building".  I have no doubt      whatever  that   Mr.  Banerji   was      perfectly justified  and correct in      inviting us  to take  the view that      this was  not a  partnership but it      seems to  me bearing  in  mind  the      juxtaposition    which    I    have      mentioned, that although these four      persons did  not constitute  a body      which was  the same  as partnership      it was  in many respects similar to      a partnership  and was  approximate      to a partnership and it may well be      that   the    intention   of    the      legislature was to hit combinations      of  individuals  who  were  engaged      together in  some joint  enterprise      but  did   not  in  law  constitute      partnerships within  the meaning of      both Section  3 and  Section 55  of      the Indian Income Tax Act, 1922,"      Costello, J.‘s  observation that  the intention  of the legislature was  to hit combinations of individuals who were engaged together in some joint enterprise but did not in law constitute partnerships  aptly sums  up the position. Bodies or   Associations   which   were   neither   companies   nor partnerships in  law were  sought to be taxed if the persons or individuals  constituting the  body  of  the  association combined to engage in an activity to produce income.      It  is  also  important  to  note  that  in  that  case Costello, J. was invited to give a general definition of the expression "association of individuals". He observed:-      "Mr. Banerji  invited  us  to  take      upon ourselves  the  difficult  but      not  indeed   impossible   of   the      expression     "association      of      individuals". In my opinion that is

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    not desirable  from  any  point  of      view whatever.  Each case  must  be      decided upon its own peculiar facts      and circumstances. When we find, as      we do find in this case, that there      is a  combination of persons formed      for  the   promotion  of   a  joint      enterprise banded together if I may      so put it, as co-adventurers to use      an archaic  expression then I think      no difficulty  whatever  arises  in      the way  of  saying  that  in  this      particular case  these four persons      did constitute  an "association  of      individuals" within  the meaning of      both Section  3 and  Section 55  of      the Indian Income Tax Act, 1922."      We were  also referred  to the  case of  Re:  Keshardeo Chamria, 5  ITR 246  and it  was contended  that in a family business, a  situation may  arise where  some members of the family carry  on the business jointly, From that it does not follow that the members of the family must be assessed as an "association  of   persons".  In  that  case,  there  was  a partition suit followed by appointment of a Commissioner for Partition for  dividing the  Properties among the members of the family.  Panckridge, J.  observed that the status of the members of a Mitakshara family changed after the preliminary decree of partition. He went on to observe:      "The  members   of  such  a  family      appear to  me to  be  in  the  same      position  as   the  members   of  a      Dayabhaga family,  and it has never      been suggested  as far  as  I  know      that  members   of  such  a  family      cannot be  individually assessed in      respect of their shares"      It was held in that case that the members of the family could not  be treated  as an "association of persons". It is to be  noted that  in that  case no business was carried out jointly by  two individual  members of the family, but after partition the  members of  the  family  held  properties  as tenants in common like the members of a Dayabhaga family.      In the case of Commissioner of Income Tax, Bombay North Kutch and  Saurashtra v.  Indira Balkrishna,  (1960) 39  ITR 546, this Court held that  "association of persons" meant an association in  which two or more persons joined in a common purpose or common action. As the words occurred in a section which imposed  a tax  on income, the association must be one the object of which was to produce income, profits or gains. In that  case, co-widows  of a  Hindu governed by Mitakshara law  inherited  his  estate  which  consisted  of  immovable properties, shares,  money lying in deposit and a share in a registered firm.  The Appellate Tribunal found that they had not exercised  their right  to separate   enjoyment and that except for  jointly receiving  the dividends from the shares and the  interest from  the deposits,  they had  done no act which had helped to produce income. This Court held that the co-widows  succeeded  as  co-heirs  to  the  estate  of  the deceased husband.  It was  held that since the widows had an equal share in the income from immovable properties, Section 9(3) of  the Indian  Income Tax Act, 1922 will apply. So far as other incomes were concerned, it was held:      "Coming back  to the facts found by      the Tribunal,  there is  no finding      that the three widows have combined

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    in a  joint enterprise  to  produce      income. The  only finding  is  that      they have not exercised their right      to separate  enjoyment, and  except      for receiving  the dividends    and      interest jointly, it has been found      that they  have done  no act  which      has helped  to  produce  income  in      respect of the shares and deposits.      On these findings it cannot be held      that  the   three  widows  had  the      status of an association of persons      within the  meaning of section 3 of      the Indian Income Tax Act."      The meaning  of "an  association of  persons" was  also examined by  this Court  in  the  case  of  G.  Murugesan  & Brothers v. Commissioner of Income Tax Madras, (1973) 88 ITR 432. It was held in that case that an association of persons could  be   formed  only   when  two   or  more  individuals voluntarily combined together for certain purposes. Volition on the  part of  the  members  of  the  association  was  an essential ingredient.  It was further held that even a minor could  join  "an  association  of  persons"  if  his  lawful guardian gave  his consent.  The income  in that  case arose under two  heads house  property and  dividends from shares. The question  before this  Court was  whether  the  dividend income should  be assessed  in the hand of an association of persons or  individuals.  One  Sinnamani  Nadar  executed  a settlement deed  in  favour  of  his  four  grand-sons.  The property covered by the settlement deed comprised of a house property which  had been let out and some shares. The donees were to  enjoy the  income of  these properties during their life-time. Thereafter,  the properties   were  to devolve on their children. In that case, it was Pointed out that Income Tax return was filed in the status of association of persons prior to the assessment year 1959-60 to 1962-63, the returns were submitted  as individuals specifically stating that the donees were not functioning as an association of persons.      In the  case of  Mohamed Noorullah  v. Commissioner  of Income Tax,  Madras, (1961) 42 ITR 115, one Oomer Sahib used to carry on business of manufacture and sale of Spade Clover brand beedies. After his death minor son, Mohamed Noorullah, and his  widow Luthfunnissa  Begum, and four children by her who were  all minors at the date of the death of Oomr Sahib, carried on  the business.  Noorullah through his next friend applied to  sue in forma pauperis and during the pendency of those proceedings  two advocates  of  the  High  Court  were appointed joint  receivers of the properties of the deceased on March 17, 1943. On May 10. 1943, the widow, Luthfunnissa, filed  a  suit  for  partition  and  also  applied  for  the continued and they carried on the business as before. In due course a  preliminary decree  for partition  was passed. The High Court  noted that  none of  the parties wanted to break the continuity  of the  business after  the death  of  Oomer Sahib. The  joint  receivers  continued  the  business  till November 25,  1946 when  the business was put up for sale by auction and  was purchased by Noorullah. The question was as to the  status in which the income of the business was to be taxed.      This Court held that the High Court had rightly come to the conclusion  that the  business was  the business  of  an association of persons. None of the partners wanted to break the unity  of control of the business  or its continuity and the business  was of  such a  natural that  it could  not be carried on without such consensus. The income was the income

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of a  business which  was carried on as a single business by the consent  of all  the parties.  The mere fact that a suit was pending at the time for the administration of the estate of the  deceased or  for the separation of the shares of the co-heirs did not affect the incidence of taxation.      Although strong  reliance was  placed  on  these  three decisions  on   behalf  of  the  appellant,  none  of  these decisions come  to the aid of the contentions made on behalf of the appellant.      The finding  fact in  the case  of  Indira  Balakrishna (supra)  was  that  the  widows  except  for  receiving  the interest and  dividend jointly  had done  no act  which  had helped to produce the income.      In the  case  of  G.Murukesan  (supra),  dividend  from shares and  income from  properties  were  received  by  the heirs. Here again no business activity was involved.      Mohamed Noorullah’s  (supra) comes  very close  to  the facts of  the case  before us.  The business  was continuing after the  death of the father. None of the heirs wanted the business to come to an end. Although the widow and the minor children had  not started  the business together. Therefore, income from the business had to be assessed without dividing the income  between the  widow and  the minor  children.  To borrow the  language of  Costello, J.,  the intention of the charging Section  even under  the Act  of 1961 is to hit the combinations of  individuals who  engaged together  in  some joint enterprise, even though they did not in law constitute a partnership.      The contention  on behalf  of the appellant is that the assessment has  been wrongly  done in the status of "body of individuals". This phrase is not to be found in the repealed Act of  1922 and the meaning ascribed to this phrase must be quite distinct  and separate  from the  meaning given by the Courts to the phrase "association of persons".      Section 4  is the  charging section under the 1961 Act. It has  imposed a  tax on the income earned by a ‘Person’ in the previous  year. ‘Person’  has been  defined  in  Section 2(31) of the Act as under:      "(31) ‘Person’ includes-      (i)    an individual,      (ii)   a Hindu undivided family      (iii)  a company      (iv)   a firm,      (v)    an association of persons or             a body of individuals,             whether incorporated or not,      (vi)   a local authority, and      (vii)  every artificial juridical             person, not falling within             any of the preceding sub-             clauses;"      In this definition, in clause (v), both ‘association of persons’ and  ‘body’ of individuals’ have been included with the added words "whether incorporated or not". Another thing to note  is that  clause (v)  speaks of  "an association  of persons or  a body  of individuals".  This implies  that  an "association of  persons"  is  not  something  distinct  and separate from  "body of  individuals". It  has been added to obviate any  controversy as  to whether only combinations of human beings  are to be treated as a unit of assessment. The intention clearly  is to  hit combinations  individuals  and individuals, combinations of individuals and non-individuals and also  combinations of  non-individuals with  other  non- individuals  who   are  engaged   together  in   some  joint enterprise when  such joint  enterprise does not fall within

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any of  the other  categories enumerated in sub-section (31) of Section 2 of the Act.      It is  of interest  to note  that the  phrase "body  of individuals" has  been used  by the  Parliament in a revenue Act even  before the  Income Tax Act, 1961 was passed. Under the Gift Tax Act, tax was imposed on gifts made in course of every assessment  year commencing  on and from the first day of April,  1987  at  the  prescribed  rate  by  a  "person". "person" was  defined in  clause (xviii)  of  Section  2  as under:      "(xviii) ‘person’  includes a Hindu      undivided family or a company or an      association   or    a    body    of      individuals  or   persons,  whether      incorporated or not;"      When  the   Gift  Tax   Bill  was   introduced  in  the Parliament, ‘person   in  clause (xviii)  of Section  2  was defined as  " ‘person’  includes a  Hindu undivided family". The charge  of Gift Tax was on gifts made by a person during the previous year.      In the Statement of Objects and Reasons to the Gift Tax Bill, it was stated:-      "The object of this Bill is to lavy      a tax on gifts made by individuals,      Hindu      undivided      families,      companies, firms  and  associations      of persons.  Gifts from  one person      to  another  provide  a  convenient      means  of   avoiding  or   reducing      liability to  estate duty,  income-      tax,  wealth-tax  and  expenditure-      tax."      In spite  of this  Statement of  Objects  and  Reasons, there was no specific mention of any other entity apart from Hindu  undivided  family  in  the  inclusive  definition  of ‘person’ in the Bill, although it was stated that one of the objects of  the Bill  was to prevent evasion or reduction of income tax liability.      After the  Bill passed  through  the  Select  Committee clause (xviii)  of Section  2 was  modified and ‘person’ was defined as under:-      "(xviii) ‘person’  includes a Hindu      undivided family or a company or an      association   or    a    body    of      individuals  or   persons,  whether      incorporated or not :-      The Income  Tax Bill  was introduced  in Parliament  in 1961. There  the charge  was on total income of a person. In the Notes  on Clauses  it was explained in Clause 4 that for the different  entities, individual,  Hindu undivided family etc. mentioned  in Section  3 of  the existing Act, the word ‘person’ had  been substituted.  Sub-clause (31) of Clause 3 explained  the  definition  of  ‘person’  in  the  following words:-      "(31). The  definition of  ‘person’      in section 2(9) of the existing Act      has been  amplified.  The  existing      definition  includes  (a)  a  Hindu      undivided family  and (b)  a  local      authority. The  General Clauses Act      defines  ‘person’  as  including  a      company   or association or body of      individuals, whether incorporaed or      not. The  charging section  of  the      existing Act  enumerates the  units

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    for taxation  as "individual, Hindu      undivided  family,  company,  local      authority,    firm     and    other      association  of   persons  or   the      partners of  a firm  or the members      of the  association  individually".      Section  4   of  the  existing  Act      refers  to  a  ‘person’.  It  is  ,      therefore,  desirable   to  have  a      comprehensive  definition   of  the      word ‘person’  so as  to cover  all      the entities  mentioned in  (i) the      existing  definition   in   section      2(9), (ii)  the  existing  charging      provisions in  sections 3 and 4 and      (iii)  the  General  Clauses  Act."      In the  Indian  Income  Tax,  1922  ‘person’  has  been defined to  include a  Hindu undivided  family and  a  local authority. The  object of giving the expanded definition was to cover  all entities  taxable under  the Indian Income Tax Act, 1922  as  well  as  the  entities  falling  within  the definition of  ‘person’ under  the General  Clauses Act.  In other words,  the intention  of the  Legislature was  not to limit the charge to certain specified entities only.      In the  background of  these definitions,  when several individuals are  found  to  have  joined  together  for  the purpose of  making profit,  the group  of individuals may be conveniently described  as "a  body of individuals". We have seen how  the controversy  arose under the Indian Income Tax Act as to the meaning of "association of individuals". There was a  conflict of  opinion on whether ‘individuals’ include artificial or  non-juridical persons.  But there  can be  no scope of  any controversy now. "An association of person" or "a body  of individuals",  whether incorporated  or not, has been brought  within the  net of  taxation. The intention of the legislature is clearly to hit combination of individuals or other  persons who  were engaged  together in  some joint enterprise. The  combinations of or may not be incorporated. A profit-yielding  joint venture has to be taxed as a single unite.      In the  case before  us, we have a window and her minor sons who are engaged in the business activity which sons who are engaged in the business activity which generates income. It does  not make  any difference  that the  window and  the minor sons  did not  start the  business. The  business  was inherited. But the fact that the business has been continued by the  widow on  her own behalf as well as on behalf of the minor sons  after buying  the interest of the mother goes to show that  there is an organised activity jointly carried on to produce  income. It  is a  clear case  of joint  business venture of  a few  individuals. The  income of this business has been  rightly assessed  in the  status  of  a  "body  of individuals".      We are  of the  view that  the High Court has come to a correct decision.  It is not necessary to refer to the large number of  cases that  have been  cited before  us but it is well settled  by this  Court under  the Act  of 1922,  by  a series of judgments that ‘association of persons’ must be an association is  also well  settled by  a number  of decision right from  the case  of Commissioner  of Income Tax, Bombay Laxmidas and another (supra).      Two more  arguments were  advanced  on  behalf  of  the appellant which must be noted. The first was that a "body of individuals" implied  an artificial  body like  a  Board  of Trustees or  Board of  Commissioners etc. Such bodies may be

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brought  within   the  ambit  of  the  expression  "body  of individuals". But  that will  not limit  the  scope  of  the expression "body  of individuals’. It may take in artificial persons as well as natural persons.      The second argument was made with reference to Sections 160, 161 and 166 of the Income Tax Act that since the mother was acting as guardian of the minors, the mother’s liability under the  Income Tax  Act was  as representative  assessee. Sections 161 and 166 of the Income Tax Act are as under:      "161. Liability  of  representative      assessee. (1)  Every representative      assessee, as  regards the income in      respect   of    which   he   is   a      representative assessee,  shall  be      subject   to   the   same   duties,      responsibilities and liabilities as      if the  income were income received      by or  accruing to  or in favour of      him  beneficially,   and  shall  be      liable to  assessment  in  his  own      name in respect of that income; but      any such assessment shall be deemed      to  be   made  upon   him  in   his      representative capacity  only,  and      the tax shall, subject to the other      provisions   contained    in   this      Chapter,   be   levied   upon   and      recovered from  him in  like manner      and to  the same extent as it would      be leviable  upon  and  recoverable      from the person represented by him.      (1a)    Notwithstanding    anything      contained in sub-section (1), where      any income in respect of which  the      person mentioned  in clause (iv) of      sub-section (1)  of section  160 is      liable as  representative  assessee      consists of,  or includes,  profits      and gains of business, tax shall be      charged on  the whole of the income      in respect  of which such person is      so liable  at the  maximum marginal      rate:      Provided  that  the  provisions  of      this sub-section  shall  not  apply      where such  profits and  gains  are      receivable under  a trust  declared      by any  person by  will exclusively      for the  benefit  of  any  relative      dependent on  him for  support  and      maintenance, and  such trust is the      only trust so declared by him.      Explanation-For  the   purposes  of      this sub-section, "maximum marginal      rate"  shall   have   the   meaning      assigned to  it  in  Explanation  2      below sub-section  (3)  of  Section      164.      (2) Where any person is, in respect      of  any  income,  assessable  under      this Chapter  in the  capacity of a      representative assessee,  he  shall      not, in  respect of  that  of  that      income, be assessed under any other      provision of this Act".

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    "166. Direct Assessment or recovery      not   barred.    Nothing   in   the      foregoing sections  in this Chapter      shall  prevent  either  the  direct      assessment of  the person  on whose      behalf or  for whose benefit income      therein referred  to is receivable,      or the recovery from such person of      the tax  payable in respect of such      income."      It was  contended on  behalf of  the appellant that the minors’ income  had to  be assessee. It could not be clubbed with any  other income  of the  mother. Mother was the legal guardian and her personal income must be assessed separately altogether. In  view of the provisions of Section 161 it was not open  to the Income Tax Officer to tax the income of the minors as  well as  the mother  in the  status of  "body  of individuals".      We are  unable to  uphold this argument. Section 161 is an enabling provision. The charge that is imposed by Section 4 may  be computed  and recovered in the manner laid down in the Act  including Section  160,161 and 166. When the minors along with their mother form a body to generate income, levy of tax  under section  4 is  on that body. The mother cannot insist that the income of the joint venture must be assessed separately on  the minors and her even when a joint business is carried on.      The underlying idea behind these sections was explained by Addison,  J. in  the case  of Hotz  Trust of Simla v. The Commissioner  of   Income  Tax,  Punjab  and  N  1  Frontier Provinces, 5  ITC 8  at 16.  Dealing with  the corresponding provisions of  the 1922 Act, it was held that where trustees carried on  a  business  under  a  testamentary  trust,  the assessment in respect of the business profits should be made not on  the beneficiaries in repsect of their individual not shares of the profits but on the trustees as an "association of persons". It was observed :      "Section 40  is merely  a machinery      section, making  the trustee liable      for beneficiaries  are difficult or      impossible to get at, and where the      trustee acts  as a conduit-pipe for      the conveyance of the income to the      beneficiaries. It  does not  affect      the charging  sections 3  and 10 of      the  Indian  Act  under  which  the      trustees  as   an  association   of      individuals,    carrying    on    a      business, are liable to be assessed      in respect  of  the  gains  of  the      business carried  on  by  them.  In      fact it  is clear  that this is the      only way that the profits and gains      of the  business, carried on by the      trustees, can  be taxed.  For it is      obvious that,  if what goes to each      beneficiary every  year only can be      taxed, much  of the income acquired      by  the  business  will  altogether      escape  taxation,   and  that   the      income     received      by     the      beneficiaries  is   not  the   true      assessable income  as many  of  the      expenses incurred  by the trustees,      which would  be paid out before the

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    distribution takes place, would not      be admissible  under the  Act.  The      profits and  gains of this business      carried on  by  the  trustees,  can      only be  calculated in the hands of      the  trustees   as  such   and  the      assessment  in  the  hands  of  the      beneficiaries would  be in  reality      inconsistent with  the intention of      the Income-tax  Act.  The  trustees      both carry  on the business and are      in receipt of the profits and it is      they who  must be  taxed under  the      charging sections."      The full Bench of Madras High Court in the case of J.V. Saldhana v.  The Commissioner  of Income-tax,  Madras 6  ITC 114, reiterated  the same  principle in a case where a widow with her  six minor  children succeeded to the estate of her deceased husband  consisting of  coffee  plantations,  house properties and  a third share in a firm of coffee curers and settlers. The  widow continued  to carry  on the business in the same  manner as was done by the deceased. It was held by the  Full   Bench  that  when  properties  of  a  number  of individuals were  put together  and one business was carried on with  the combined  resources, it  was open to the Income Tax Officer  to regard  it as  one business carried on by an "association of  individuals" within  the meaning of section 3 of  the Act.  A single  assessment should  be  made  under Section 10(1)  of the  Income Tax  Act on  the entire income from the  business. It was also held that Section 40 and the following sections  were machinery and enabling sections and not charging sections.      In our  view, these  two decisions correctly stated the law under  the Act of 1922. These principles will also apply to the corresponding provisions of the Income Tax Act, 1961.      In view  of the  aforesaid, the  appeals are dismissed. There will be no order as to costs.      C.A.NOS. 1664-66/86 AND 4365-69/85      In view  of our  judgment in  C.A. No.  1297-1301/1980, these appeals are also dismissed with to order as to costs.      C.A. No. 1694 of 1995.      In appears  that in this case, the question was whether there was  a sub-partnership  between   A.N.Agarwal and  his wife and  minor son  and as  such the  income  of  the  sup- partnership could  not be  assessed  in  the  hands  of  the assessee under  Section 64(1)(i) and (iii) of the Income Tax Act, 1961. It has also been stated in the appeal that in the case of  A.N.Agarwal, assessment  was made  in the status of individual for  the years  1964-65  and  1965-66.  In  those proceedings special  leave petitions  have also  been filed. The point involved in this case is not the same as the point that came up for consideration in the case of C.A. No. 1297- 1301/1980. Therefore, this appeal is directed to be delinked from the other appeals that are being disposed of today.